Friday, May 20, 2005

Chaos in the Kremlin?

It's increasingly strange news coming out of Russia these days. Signs are multiplying that a state of chaos might be emerging in the Kremlin.

After having been delayed until after the May 9 celebration, the sentencing of Mikhail Khodorkovsky was scheduled for Monday of this week.

But still - and it's Friday today - we haven't seen more than Judge Irina Kolasnikova mumbling through limited sections of the verdict in short daily doses. It's a parody of the worst sort. On present trends, this parody might well go on all of next week until she starts to approach the final and crucial parts of the lengthy text.

It is very hard to interpret this in any other way than as a reflection of a genuine political uncertainity on how to handle the case. It might well be that she doesn't know what will be on the final pages of the document she's mumbling through. Instructions have yet to arrive.

That there is nervousness was obvious from the hasty announcement Tuesday on the abandonment of the plan to merge state oil company Rosneft with the gas giant Gazprom.

This plan had previously had the explicit endorsement of President Putin, but was challenged by a security-associated part of his staff that wanted primarily to get their hands on the assets of Rosneft.

It become a confict in the higher reaches of the Kremlin - between Chief of Staff Medvedev as Chairman of Gazprom and Deputy Chief of Staff Sechin as Chairman of Rosneft - which paralyzed the entire issue.

The pattern of the last year is that when there is some profoundly bad news in Russia, the Kremlin suddenly sees the need to do something to reassure the international markets and investors.

Following this pattern, and with intense global attention on the mumbling lady in the courtroom, a decision was hastily taken to resolve the conflict over Rosneft and Gasprom.

So it was announced that there will be no merger, that the Russian state will buy a share of Gazprom for USD 7 billion, and that there will thereafter be a complete liberalisation of the shares in what will then be a clearly state-controlled company. And Rosneft will be a separate company that will eventually be open for minority private ownership as well.

In itself, this was good news, and the markets reacted accordingly.

But it was obviously a decision taken in haste, details might yet change, motives why it was taken now much too obvious - and it demonstrated that President Putin isn't necessarily the one that carries the day on vital issues in the Kremlin.